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This content was reviewed and approved by Tamlin Russell.

If you pass away before retirement age, your pension doesn’t usually just disappear. If you’re unable to claim from your pension, you could arrange for your loved ones to benefit instead.

By naming someone you hold dear as a beneficiary, they’ll be able to use the retirement income you’ve worked hard to build. However, the outcome can change depending on the type of pension you have.

In this article we’ll answer all the key questions surrounding private, workplace and State Pension death benefits to help you secure your loved one’s financial future.

What happens to your State Pension if you die before retirement?

You may have questioned what happens to your State Pension if you die before retirement? If you reached State Pension age before 6 April 2016, your spouse or civil partner may be able to inherit certain benefits, but only under specific conditions.

To understand what they might receive, check the government guidance.

Under new State Pension

If you reached State Pension Age on or after 6 April 2016, you’ll be entitled to the new State Pension, which cannot usually be inherited.

The exception is where you paid into the Additional State Pension before 2016 and would have got more under the old rules. In this case, you’re due a ‘protected payment’ on top of the new State Pension – half this ‘’protected payment’ can be inherited, but only if you were married before 6 April 2016. 

Unfortunately, if you die before you reach your State Pension age, no payments can be passed on.

To understand exactly what your partner may be entitled to, check the government's new State Pension rules.

What happens to your private pension if you die?

Unlike the State Pension, you don't need to be married for your private pension to be passed on. The value of your pension savings, including workplace pensions and SIPPs (Self-Invested Personal Pensions), can usually be paid directly to your beneficiaries.

When you first set up a private pension, you’ll be asked to nominate beneficiaries (such as a spouse, civil partner, family member, or loved one). It’s important to review and update these details if your circumstances change to ensure your pension goes to the right person.

Please note, defined benefit pensions will normally follow different rules, so always check with your scheme provider. 

What happens to a defined contributions pension in the event of your death?

A defined contribution pension doesn’t end with your passing, and your savings can usually be passed on to your beneficiaries. Here’s how it works:

Who can inherit your pension?

Typically, your pension can go to anyone - however, if you didn’t name (nominate) your beneficiary to receive the pension in your lifetime, it can severely limit their options when accessing the pension. It could also mean your wishes aren’t clear and the scheme pays the wrong person. 

You should therefore always keep your nominated beneficiaries up to date with your pension provider.

What happens to the pension pot?

• If you die before age 75, your beneficiaries can usually inherit the full pension pot tax-free.

• If you die after age 75: any money they receive is added to their income and may be subject to income tax.

If you haven’t accessed your pension yet, your beneficiary inherits the full remaining pot. If you’ve already taken some payments, the remaining balance will be passed on, depending on your pension arrangement.

Defined contribution vs defined benefit pensions

With a defined contribution pension, your beneficiaries can normally inherit 100% of your remaining balance. By contrast, a defined benefit pension usually pays a reduced percentage of your income (often around 50%) to a surviving spouse or dependant, though this varies by scheme.

What happens to a defined benefit pension if you die?

A defined benefit pension (sometimes called a “gold-plated pension”) guarantees you a secure income in retirement, usually funded by your employer. While it provides excellent benefits during your lifetime, its value after death can be more limited.

If you die before retirement (or shortly after), a defined benefit scheme will often pay a lump sum usually based on a multiple of your earnings/pension.

In most other cases, your pension stops when you pass away unless you have eligible beneficiaries. Typically, benefits might be paid to:

• Your spouse or civil partner.

• A child under 23 in full-time education.

Some pension schemes may also allow a vulnerable dependent to receive benefits, but this depends on your provider’s rules.

If your beneficiaries qualify, they will typically receive a percentage, for instance 50% of your pension entitlement, sometimes more, depending on the scheme.

If you’ve already organised a payout from an annuity, what happens?

If you've used your pension to buy an annuity, you will usually have been offered the opportunity to add death benefits. If you didn't do this, it's unlikely that your annuity will continue once you pass away. Without the right protection in place, your payments could stop, leaving nothing for your loved ones.

To make sure your annuity benefits your family, you can choose options such as:

• Guarantee periods - Ensures payments continue for a set time. If you pass away during this period, your chosen beneficiary will still receive the income.
• Value protection - Safeguards the value of your annuity, so some or all of the original amount can be paid to your beneficiaries on death.
• Joint life annuity - Provides ongoing income to a chosen beneficiary if you pass away, payments transfer to the named person in your annuity plan.

These protection options can provide reassuring peace of mind that your annuity benefits won’t end with you but instead provide financial security for your loved ones. 

Need support with preparing for retirement?

At LV=, we offer a non-judgmental and friendly retirement advice service that’s designed to boost your confidence in your retirement plans. Whether you’re preparing for the future or want a contingency plan in place for your family, our advisers are on hand to help you. Get in touch today.

Pension FAQs

When do your loved ones have to worry about inheritance tax?

Currently, most pensions are free from inheritance tax. But, from April 2027, following the announcement in the Autumn Budget 2024, most inherited pensions will be subject to inheritance tax and will be considered as part of your estate. 

Who should you nominate as your beneficiary?

In short, you should nominate whoever you want to receive your pension pot. However, in some cases your pension scheme will have pre-determined rules over who will receive any death benefits.

Where you haven’t accessed your pension yet or are in income drawdown, it’s worth naming everyone who you might want to benefit, which will ensure maximum flexibility for your beneficiaries.

However, it’s very important to make sure your wishes are crystal clear and won’t be misinterpreted. For example, you might want to state “I nominate my spouse, Linda, to receive 100% of my pension in the first instance. However, if she has predeceased me or does not want to receive some or all of the benefits, I nominate my children, Brian and Sarah to receive my pension in equal shares”. 

This ensures that everyone named will qualify as a ‘nominee’, but also clarifies the order in which they should be considered, making it more likely that your intended outcome will happen. 

Depending on your provider, they may also have some restrictions around who can benefit. For example, providers for defined benefit schemes may only pay to a spouse or civil partner. However, it’s not uncommon for children under 23 years old or vulnerable adults to also be classed as beneficiaries.

Will your family pay income tax when claiming your pension?

They may, especially if you pass away after you’ve turned 75. However, if you pass away before you reach 75, any pension death benefits are often tax-free.

Is the State Pension age likely to change in the future?

Yes, the State Pension age is currently 66, but will start increasing again in May 2026. You can check your current State Pension age – note that the Government keep the State Pension age under regular review, so this may change again in the future.

What is the maximum lump sum allowed by HMRC?

You can usually withdraw up to 25% of your pension savings as a tax-free lump sum, capped at £268,275.

Can I add more than one beneficiary?

Yes, you can usually nominate as many beneficiaries as you wish. If you do this, you should specify what percentage of your pension savings you’d like each beneficiary to receive and then order that they should be considered (if relevant). 

What happens if I don't nominate a beneficiary for my pension?

If you don’t nominate a beneficiary for your pension, it may not be clear who you'd want to receive your pension benefits after you pass away. The scheme trustees or administrators often exercise discretion, and will consider close family, dependants, or anyone financially connected to you.

This process can delay payments while trustees investigate the most suitable recipient, and there’s also a risk that your pension could go to someone you never intended.

To help ensure your pension goes to the right person/s nominate your beneficiaries and update these nominations if your personal circumstances change.